It’s October which means ghosties and long-legged beasties! But there is no other monster as scary as the horrifying mortgage myth! Various mortgage myths have been haunting and scaring people from trying to buy their own home. But fear not! These spooky mortgage myths are not what they appear- which is why we list below some of the common and most terrifying myths that are nothing more than smoke and mirrors.
1.) Your Income DETERMINES How Large Your Loan Is
Luckily, your income is only one of many variables we look into when determining your loan. There are multiple kinds of paperwork we go through to determine your financial status. You may have a large income with a $100,000 salary, but it does not matter if the majority of it is going towards credit card debts and other loans. As we say, it’s not what you make, its what you spend. This is called the debt-to-income ratio. We actually recommend taking a look at the percentage of your salary that goes towards mortgage payments as it becomes overwhelming the higher it is. Therefore any mortgage professional will look into their client’s income along with all current debts and overall credit scores. They do so in order to find the best mortgage that is achievable as well as stress free. Other mortgage lenders may try to qualify their clients on a higher front end ratio, but for the sake of financial stability it is recommended to keep it below 45%.
2.) Perfect Credit Is REQUIRED To Get A Mortgage
Your credit is an important variable to determining your interest rate as stated above, but it doesn’t have to be perfect for you to qualify for a mortgage. There are various programs that we have available for clients that have their credit score in the low 600s. This varies between mortgage lenders which is why it is important to speak with various mortgage professionals. Of course a 400 score will not be able to qualify you for a loan program, But we work with all of our clients who do not immediately qualify by create a Mortgage Plan. We will coach you so that you may have financial health that will help you achieve a decent credit score. If you want more information on this you may speak to one of our professionals.
3.) I Need AT LEAST 20% Down Towards My New Home
This is a common one. The truth is, though it is highly recommended, it isn’t required. There are great programs for those who are able to put down a 20% down payment, but it is not a requirement. In fact, we have products that accept down payments as low as 3%. The trade off comes in the monthly payments, the rates that are available to you, and the availability of real estate in the market. This myth applies specifically to primary residence. For investment homes, it actually becomes a more complicated matter of not just considering a down payment, but also closing costs, and reserves. Don’t know what that is? Not a lot of people do. We cover this in our video describing the basics of investment homes.
4.) Renting Is MUCH Cheaper Than Buying
This one is complicated. In most cases, it is more affordable to own your home than to be renting. There are various things to consider when it comes to this myth which ultimately comes down to whether or not you want to settle down. If you are planning to do so, the,n in the long run, it is more affordable to own your home than it is to rent.
5.) Once You’re Denied, You Could NEVER Qualify For A Mortgage
Do not lose hope if you have been denied qualification for a mortgage loan. At The Estrada Mortgage Group, the mortgage professionals actually work with their clients that cannot qualify for a mortgage by creating a Mortgage Plan. It is important to repeat the process of mortgage planning because many clients feel all hope is lost if they cannot buy a home. The truth is though they may have been denied by one lender, it is not the case with every mortgage lender. There are many lenders out there that are willing to work with the clients and their families so that they may have the financial security to qualify for a mortgage loan.
6.) You CANNOT Get a Mortgage If You’ve Filed For Bankruptcy
This is not entirely true! Depending on whether the client filed for Chapter 7 or 11, they would have to wait the minimum number of years before they are able to secure mortgage financing. It is important to discuss this with a local mortgage professional to properly plan out their future qualification. If there is one thing to take away from this article, it is communication with your local lender is key. They will help you figure out that some information being spread out there simply isn’t true. So this Halloween, just remember that not everything you see is real- from abominations to Mortgage Myths to zombies, there are monsters and myths out there that are made just to scare people.